4.3Small Business Relief: who qualifies and how to claim it

Revenue limit

AED 3 million or less, in the tax period and in every previous tax period

Periods covered

Tax periods starting on or after 1 June 2023 and ending on or before 31 December 2029

Who can claim

UAE resident businesses, companies and individuals, including free zone companies that are not Qualifying Free Zone Persons

Who cannot

Qualifying Free Zone Persons and members of multinational groups with consolidated revenue of AED 3.15 billion or more

How to claim

Choose it in your Corporate Tax return, for each tax period. You must be registered first.

What the relief does

Small Business Relief is optional. If you choose it for a tax period, you are treated as having no taxable income for that period, so there is no Corporate Tax to pay. You also file a simplified tax return, and if your revenue is AED 3 million or less you can prepare your financial statements on a cash basis.

It does not take you out of the system. You still register for Corporate Tax, file a return each tax period and keep records that prove your revenue.

Who can and cannot claim

Who can. The relief is for resident persons: companies, and individuals who carry on a business that makes them subject to Corporate Tax (when an individual must register is in guide 4.1). A free zone company that is not a Qualifying Free Zone Person can claim it. A Qualifying Free Zone Person that elects to be subject to Corporate Tax under the standard rules for a tax period (Article 19 of the Corporate Tax Law) can also claim it for that period, if it meets the conditions.

Who cannot.

• A Qualifying Free Zone Person. It has its own regime, covered in guide 4.4Coming soon.
• A member of a multinational group with total consolidated group revenue of AED 3.15 billion or more.
• Any business whose revenue went over AED 3 million in an earlier tax period (see the next section).
• A business that has been artificially split to stay under the limit (see Splitting a business).

Foreign businesses with a permanent establishment in the UAE are generally not eligible, with a narrow exception under some tax treaties. They are outside this guide.

The revenue test

Revenue, not profit. Revenue is the gross amount of income for the tax period, before any costs. In an FTA example, a company with AED 1.5 million of sales, AED 1 million of dividends and AED 2 million of expenses has revenue of AED 2.5 million: it is eligible, whatever its profit.

One-off income counts. The sale of a business asset is part of revenue. In another FTA example, a shop owner whose revenue reaches AED 4.15 million in the year they sell the shop is not eligible for that year.

Once over, never again. The limit applies to the current tax period and every previous one. If your revenue goes over AED 3 million once, you cannot claim the relief again, even if revenue falls back later. The FTA's own example: revenue of AED 4.3 million for the period ending 31 December 2025 and AED 1.9 million for the period ending 31 December 2026 means no relief for 2026.

What else to know.

• VAT you charge is not part of revenue. The relief does not change your VAT obligations (guide 4.6Coming soon).
• A company counts all its UAE and foreign income. An individual counts UAE business income and only the foreign income related to that UAE business.
• A Tax Group is treated as one person: the AED 3 million limit applies to the group's revenue as a whole, not to each member.

How to claim it

1. Register for Corporate Tax and get your Tax Registration Number for Corporate Tax (TRN): the election is made in a tax return, so you need it first (guide 4.1).
2. Choose Small Business Relief in your Corporate Tax return. It is a choice for each tax period, not a one-time option.
3. Check before you submit. If a return is submitted without the election, you cannot claim the relief for that period later.

When and how to file the return is covered in guide 4.5Coming soon.

What you give up

For a tax period in which you choose the relief:

• A tax loss from that period cannot be carried forward. Losses from earlier periods without the relief can still be carried forward to later periods without the relief.
• The same applies to net interest expenditure: none can be carried forward from that period.
• Other exemptions, reliefs and deductions are not available, including relief for transfers within a Qualifying Group and Business Restructuring Relief.
• You do not need to keep transfer pricing documentation, but deals with related parties and connected persons must still follow the arm's length principle.

If you expect a loss, or plan a group reorganisation, ask a registered tax agent whether choosing the relief that year is right for you.

Records to keep

You must be able to show your revenue. There is no prescribed list; the FTA gives examples such as bank statements, sales ledgers, invoices or till rolls, order records and delivery notes, and correspondence. Electronic copies are fine, as long as they are readable and available to the FTA on request. Keep them for 7 years after the end of the tax period they relate to. Record keeping in detail is in guide 4.8Coming soon.

Splitting a business

Dividing one business into several entities so that each stays under AED 3 million is artificial separation. The FTA treats it as a tax advantage under the general anti-abuse rule. If it finds artificial separation and the overall revenue is above the limit, the relief is refused, the tax that would have been due must be paid, and a penalty may be imposed.

The FTA describes three forms: by function (for example, food and drinks sales of one restaurant), by location (the same activity at several sites, such as a chain of cafes) and over time (a series of entities that stop when they reach the limit).

Running more than one company is not artificial separation in itself, for example to limit legal liability. The FTA looks at whether the separation has a valid and genuine commercial purpose, and whether substantially the same business is being carried on.

How long it lasts

Ministerial Decision No. 131 of 2026, issued on 29 July 2026, extends the relief to tax periods ending on or before 31 December 2029. It comes into effect the day after its publication. The Ministry of Finance announced the extension on 7 August 2026.

The Ministerial Decision is the legal text. As at our last check, the FTA's Small Business Relief guide (August 2023) still shows the earlier end date of 31 December 2026, and the FTA's Small Business Relief topic page (last updated 6 May 2024) does not mention the extension. The FTA states that its guides do not change the law.

Written and checked by The Falajo Team. Spotted something out of date? [email protected]

General information, not tax or legal advice. Falajo is a software company, not a tax agent. Rules change: check the date above and the official source.